Statutory Auditing and Performance of Small and Medium Scale Enterprises in Lagos State, South West-Nigeria

Small and medium Scale Enterprises are gaining increasing prominence in the developing economics as a driver of economic growth. However, studies has shown that several of these enterprises prematurely die, before they can achieve their goals due to poor management arising from inadequate, weak, undependable accounting and financial information as well as absence of regular auditing and risk assessment.
The purpose of this research is to access the impact of statutory Auditing of Small and Medium Scale Enterprises on their performance. The sample for the study comprises of 100 SMEs operators and 25 practicing public accountants purposively selected across the three Senatorial districts in Lagos State South West, Nigeria, using stratified sampling techniques to ensure that only those who are knowledgeable about issues under consideration were selected. The primary data for the study was gathered from a combination of Survey questionnaire and semi-structured interviews of key Informants. Data captured from the study were analyzed through descriptive statistical methods, while the two hypotheses formulated for testing in the study were tested using the Pearson Product Moment Correlation Coefficient and Student’s t-test.
Finding from the study reveals that absence of standard accounting system and detailed financial records has been a major impediment to Statutory Auditing of many SMEs, and by extension negatively affect their performance as they find it difficult to convince stakeholders (creditors, supplier, tax authorities etc.), that there has been regular oversight by an independent expert into the affairs of the firms. The finding further revealed that this can be eliminated through adoption of sound accounting System that conforms to International Auditing Standards. It was therefore recommended that SMEs should be encouraged to adopt and embrace sound accounting system. More so, the cost of Installing and operating such system should be minimized so as to encourage the SMEs to keep extensive documentations requirement of auditing Standard.